Guaranteed Modification

A lot of people tell me about companies that offer a guarantee for modification services and my reply  is: “who do you know that has called them on it?” There is usually dead silence because how good is a guarantee? It is only as good as a company is prepared to honor it so examine all the small print. There are not many companies that can afford to expend resources on a modification win or lose and not get compensated.

From the law office standpoint I liken it to the same set of circumstances as if I was to represent a person in court, I cannot guarantee the outcome and to do so is unethical because you, the client might not give me all the facts or can withhold information about trying to do it on your own previously and then we try and encounter huge obstacles. I’ve had clients that did their own submissions and failed (because they gave too much or wrong information) and they don’t tell us and then we meet with resistance. Now we’ve been able to get them through but because this happens there is no way to guarantee the outcome and we expend thousands of dollars of time and effort in each case so we just cannot offer a refund. Our guarantee is best efforts and if your situation is modifiable you’ll get modified and we don’t even need to go there about rejection and if that happens, maybe it is exactly what needs to happen because not only does the person not qualify for the home now, they won’t be able to afford it with any program so they should think short sale and move on. Many properties will not make sense and most banks do not offer a principal reduction because they cannot get permission from their investors to eat that much of their expected profits. The old adage of when does a negative -30 + 43 = 0 and that is any time the market goes down 30% it has to get back to 43% just to put you back where you were before it dropped.  I see many instances where the properties are down 50% and the borrower might now recover the home value in their life time and getting out with a short sale really makes financial sense.

On the fees, if you’re using a law firm and they are going to give it to you for a fixed fee, grab that and run if it is around $3,000 to $4,000. When I was at a law firm we had software that started to calculate our hourly from the time the phone was picked up until we hung it up and we were taught to keep the client on the phone and run it up. Every fax that went out was $1.00 per page and every photo-copy was .30 cents per page.  The hourly of an experienced real estate or finance attorney is going to be $375.00 per hour or more and they may have processors or paralegals that are going to be $100 to $150 per hour. When you average 40 to 100 hours per file you are going to get your money’s worth because it takes hour upon hour and constant follow-up with the banks…more than most people who work will every have. I can’t see a modification starting out less than $5,500 under typical law firm billing and the client could expect to get a back-end invoice for about the same because of the time and expenses for faxing, photo-copying and FedEx that takes place. Therefore, a completed modification would normally be upwards of $10,000 by the time it is done. Grab a modification for a fixed $3,000 to $4,000 because it is a super deal.

You can always go to a non-lawyer but you are really putting yourself in a position to have your documents used against you since a broker or any other helper cannot afford you the attorney/client privilege. You need to make sure your submission is not used as a smoking gun against you especially if you were a stated income loan and you and your broker or loan officer expanded your income for the purpose of qualifying on the loan.

If you want solid assistance at a fixed legal fee price, please contact my office.

Sincerely,

James Burns, Esq.

“Loan Modification or Complication?”

The plan centers on Fannie Mae and Freddie Mac, which between them own or back about 31 million mortgages worth a combined $5 trillion. The federal government took over the firms in September due to mounting losses on their portfolios of mortgages.

Eligibility is determined by several factors: Homeowners must be 90 days or more late in their mortgage payments, owe at least 90% of their home’s current value, live in the home on which the mortgage was taken and have not filed for bankruptcy.

Their mortgage payments would be adjusted through lower interest rates or longer repayment schedules with the goal of bringing payments below 38% of monthly household income. Interest rates could be lowered for five years and then raised to a predetermined level. Loan terms could be lengthened to 40 years.

Officials said the standards for loan modifications should fast-track changes in payments. The standards will be applied to loans owned and guaranteed by Fannie and Freddie, but officials said they hope they will also be adopted industry wide.

“We expect that it could significantly increase the number of modifications completed,” said James Lockhart, director of the Federal Housing Finance Agency, the regulator that oversees Fannie and Freddie. …

Fannie reported this week that 1.7% of its mortgages by value are delinquent by 90 or more days. Fannie’s filings suggest that it has about 18 million mortgages on its books, which would work out to about 300,000 mortgages that could potentially be eligible. The borrower will ultimately be responsible for paying the full amount of the principal borrowed, but payment on part of the principal can be deferred to make the monthly payment affordable.

Homeowners who purposefully default on their mortgage to get a modification will not be eligible. Borrowers will have to submit a statement showing financial hardship or a change in financial circumstances, along with proof of their income. The modification will become final once a borrower has made three payments under the modified terms.

But even in cases where declining home prices have taken the value of a home to less than is owed on the mortgage, the balance of the loan will not be lowered under this program.

“This is not loan forgiveness; the loans will be paid but at terms affordable for borrowers,” said Brian Montgomery, commissioner of the Federal Housing Administration.

The fact that mortgage balances will not be reduced for the so-called underwater mortgages — those in which a homeowner owes more than the home is worth — will limit the use and impact of the program, according to some experts.

However, there is a competing interest in getting modifications done and that is the investors who purchased these loans. Some hedge funds, including Greenwich Financial Services and Braddock Financial, told banks in October that they might sue the banks if they changed mortgages that were within mortgage bonds that the hedge funds had purchased. Modifying the terms of mortgages underlying mortgage bonds can change how much those bonds are worth.

Investor rules and underlying servicing contracts with respect to modifications are not uniform and may prevent us from doing modifications that would benefits borrowers and investors.

Under the plan, Fannie Mae, Freddie Mac and other mortgage firms will rewrite the terms on some overdue mortgages so the homeowners won’t pay more than 38% of their monthly income. Modifications could include deferring some of the principal owed, lowering interest rates or extending maturities to as much as 40 years. The process will be streamlined and uniform.

If you know someone in need of saving their home have them contact my office after downloading our questionnaire which should be faxed back to use…get it here .

James Burns, Esq.

California’s New Foreclosure Law

As a result of the subprime loan market collapse, numerous bills were introduced this year in the California Legislature, including the recently enacted SB 1137.  Within this highly charged political environment, the California Land Title Association (CLTA), along with trustees, escrow companies, and lender groups originally opposed this legislation, which subsequently underwent a series of significant amendments before being signed by the Governor earlier this week.

SB 1137 became effective July 8th as an urgency measure.  However, requirements pertaining to the notice of default and the posting and mailing of an entirely new notice will not become operative until 60 days after the effective date.

The provisions of the new law outlined below apply to loans secured by owner occupied residential real property and made between January 1, 2003 and December 31, 2007.  These provisions will remain effective until January 1, 2013.  The requirements are extensive and the full act text should be consulted for details.

1. A Notice of Default (NOD) may not be filed by the trustee or lender until 30 days after contact is made in person or by telephone with a borrower to asses their financial situation and explore options to avoid foreclosure, or until 30 days after satisfying specified due diligence requirements.
2. During the initial contact the borrower must be advised of the right to request a subsequent meeting.  If a meeting is requested then it must be scheduled within 14 days.
3. An assessment of the borrower’s financial situation and discussion of options may occur at the first contact or at the subsequent meeting, but in either case the borrower must be provided a toll-free number for HUD certified housing counseling agencies.
4. A NOD must include a declaration that the borrower has been contacted or due diligence has been used to try to contact the borrower or that the borrower has surrendered the property.  Due diligence includes having a link to information on the options to avoid foreclosure on the web site of the beneficiary or their agent.
5. If a NOD was filed prior to the effective date of the new law, without a subsequent notice of rescission, then a new declaration must be included as part of the notice of sale.  The declaration must state that the borrower either was contracted to assess their financial situation and explore options to avoid foreclosure or that no contact occurred; in which case the efforts made to contact the borrower must be listed.
6. A NOD may be filed when a borrower has not been contacted as required by the new law if the failure to contact the borrower occurred despite the due diligence of the lender or their agent.  The actions that constitute due diligence are listed in the new law.
7. A new notice has been created by the law and must be posted and mailed at the same time a notice of sale is posted.  The notice advises residents that the property may be sold and that their right to continue to reside in the property may be affected, along with certain other information.

If you have questions please send us an e-mail or if your facing a personal crisis with your mortgage because it has spiked out of control with the interest rate or you owe more than the home is worth and will be worth for years to come we may have legal solutions for you that can put you on the track to recovery. Please download the form on this page and fax it to us available Right here.